Market Observer

Global stocks continue to recover amid the incident in the US Capitol

Fitch Ratings affirm that the Philippines is at BBB credit rating with stable outlook

FWD Investment Team

Investors are looking past the current chaos and are focused on resiliency.

Global stocks rallied days after violence rocked the US Capitol as investors focused on the prospects of more stimulus and a likelihood of calmness to prevail on Joe Biden’s presidency. Stocks continue to perform well during the week of Jan 7 to 13, on the back of optimism that the economy will continue to benefit from government support and vaccine rollout.

Investors are looking past the current chaos and are focused on resiliency. In Washington, President Donald Trump was impeached by the U.S. House on a single charge of incitement of insurrection for his role, but a senate trial won’t likely get under way before his term ends on January 20. In Europe, ECB will keep an easy stance for as long as needed. In Asia, Japan and South Korea were also up, HK shares were flat. MSCI ACWI +1.79% in one week, +2.36% YTD. Reports from Bloomberg, 14 Jan 2021.

Philippine Stocks

Philippine stocks also recovered on Jan 8 despite the incident in US Capitol. Investors are optimistic on Democrats gaining control of the US Senate as this would bode well for Biden’s “build back better” economic recovery program. Throughout the week, the index maintained its position in the 7,000 level despite flattish as investors struggle to find catalyst strong enough to propel it past 7,500 resistance area.

Investors also took profit recently, which slid the index slightly, on the news of increased COVID-19 cases and deaths around the world. In the coming weeks, investors will be looking at the developments that will support the country’s recovery, vaccine rollout plans, and the plans to contain the new variant of coronavirus that has now entered the Philippines. PSEi +2.77% wee-on-week, +1.44% YTD.

Philippine Bonds

Philippine bonds, on the other hand, yields on short-term bonds further decline, with recent auction three-month yield settled at 0.977, six months at 1.360% and one year at 1.605%. The Bureau of the Treasury (BTr) said the interest rates were also lower compared with the secondary market benchmark rates. However, demand is still strong as the auction was more the four-times oversubscribed with total bids reaching P86.7%, prompting the government to upsize the amount offered for the 182-day Treasury bills by additional P2 billion.

The results continue to reflect ample liquidity in the financial system and investors demand for short-term fixed income securities. Looking ahead, the BSP’s monetary operations will remain guided by its assessment of liquidity conditions and market developments. On credit rating, Fitch affirms Philippines, with stable outlook, citing modest government debt levels, “robust” external buffers and still-strong medium-term growth prospects.

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